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A floating exchange rate is a type of exchange rate which fluctuates with the supply and demand of the currency in the money market. Nowadays most of the countries are using floating exchange rate system for their currencies.currencies. This type of exchange rate system is totally opposite to the fixed exchange rate system.

According to the currency experts,floating exchange rate system is very beneficial for the economy ,as it helps the economy to rectify the balance of payments problem.A country with low foreign exchange reserves can easily survive due to floating exchange rate system